Unilever 2003 Annual Report Download - page 59

Remuneration report – policy
Base salary
Each Director receives a base salary which is fixed in the currency
appropriate to the country in which the individual is based.
There is one overall salary framework for all Directors. Each year,
the Committee agrees separate salary ranges for Directors based
in continental Europe, the UK and the US. Each Director’s salary
is reviewed annually within the agreed salary ranges.
When granting pay rises, the Committee looks at a range of
factors including individual and company performance. The
Committee also uses independent expert advice to compare
Unilever’s remuneration for executives of this calibre with
competitors.
Annual performance bonus
The annual performance bonus aims to focus the Directors on the
business priorities for the coming financial year, in accordance
with Unilever’s annual plan. The bonus can range between 0%
and 100% of base salary. However, the maximum level is payable
only in the case of exceptional performance.
To receive a bonus, Directors must achieve demanding corporate
and personal targets, set by the Committee at the beginning of
each year:
• Corporate targets: based on a combination of the increase
in earnings per share (BEIA) at current rates of exchange and
sales growth of the leading brands. A Director can receive a
performance bonus of up to 80% of base salary in respect of
these corporate targets.
• Personal targets: based on agreed key objectives relative to
the Director’s specific responsibilities. A Director can receive
a performance bonus of up to 20% of base salary in respect
of personal targets.
At the end of each financial year, the Committee reviews the
results against the targets set.
The Directors receive 75% of the annual bonus in cash, with the
remaining 25% paid in NV and PLC shares. The Directors are then
awarded, on a conditional basis, an equivalent number of
‘matching shares’. These form part of the long-term incentive
arrangements described below.
Long-term incentive arrangements
The long-term incentive arrangements for Directors consist of
three main elements:
• Share Matching Plan (linked to annual bonus)
• TSR Long-Term Incentive Plan
• Share options, which includes:
• Executive Option Plans
• All-Employee Share Plans
Share Matching Plan (linked to annual bonus)
As noted above, the Directors receive 25% of the annual bonus
in the form of NV and PLC shares, known as bonus shares. The
company then awards an equivalent number of matching shares,
which will vest three years after the award provided that:
• The original number of bonus shares have been retained for
that three-year period; and
• The Director has not resigned or been dismissed.
The necessity to hold the bonus shares for a minimum of three
years (during which time the share price of NV and PLC will be
influenced by the performance of the companies) is consistent
with the shareholding requirements described on page 55.
The Committee believes that the three-year vesting period for
matching shares supports, as far as is possible, the retention of
key executives. It also encourages the Directors to build up a
significant shareholding in the business, so that their interests are
aligned with those of other shareholders. Moreover, a three-year
vesting period is consistent with international practice.
The Committee considers that there is no need for further
performance conditions on the vesting of the matching shares
because the number of matching shares is directly linked to
the annual bonus (which is itself subject to demanding
performance conditions).
TSR Long-Term Incentive Plan
Directors receive annual conditional awards in the form of rights
over shares in NV and PLC. These awards vest after three years.
However, the number of shares that vest depends on how
Unilever’s Total Shareholder Return (TSR) compares with the
TSR results from a defined peer group.
The awards made, on a conditional basis, in March 2003 were
as follows:
Number Number
of NV of PLC
shares shares
Chairmen 7 260 46 198
European based Directors 4 537 28 877
US based Director 3 646 23 284
For the US based Director the conditional NV shares were
awarded in the form of NV New York shares and the conditional
PLC shares were awarded in the form of American Depositary
Receipts (1 ADR equivalent to 4 PLC shares).
56 Unilever Annual Report & Accounts and Form 20-F 2003